There are several shaders available that can act as a magnifying glass using the shape of the original object but I cannot find any that would allow also to display the original sprite (i.e. the original sprite would be blended with the result of distortion). This effect could be achieved using two instances of the object - one for distortion and another semitransparent shown always at the same position. But I believe this should be easy with shaders, unfortunately I have no time to familiarize myself with HLSL..
Maybe there is a shader like that out there?